The stakes could not be much higher as the Irish central bank prepares to publish a new round of stress tests for the broken Irish banks.

Matthew Elderfield, the central bank’s new head of financial regulation, Tuesday explained the background to the tests, which will be published next week.

“These tests take place in the context of a severe crisis in the euro sovereign debt markets, a weaker Irish economy subject to further fiscal consolidation, as part of a formal European Union/International Monetary Fund program for Ireland and against the background of a lack of market confidence in the Irish banking system, reflected in the stressed wholesale funding position of the banks and concerns about future loan losses under adverse scenarios,” he said.

Elderfield’s list of woes facing the Irish banks could hardly be worse.

The regulators and the new coalition government, which took power just two weeks ago, know the tests must be robust and deliver the definitive count on the losses of the Irish banks if Ireland is to have any chance of calming its calamitous banking and government crisis.

The country since last October has been cut off from debt markets and unable to refinance its budget deficits. Its banks depend almost wholly on the European Central Bank and Central Bank of Ireland for their week-by-week funding.

In November it was forced to turn to the European Union and International Monetary Fund for international loans amounting to €67.5 billion to fund its budget spending over the next few years. It then faced an effective ultimatum to sort out its banks.

At the crux of the Irish debt crisis is the question as to whether the Irish government can afford to carry much more of the financial burden. The stress tests may answer that question.

After years in which the Irish Financial Services Regulatory Authority spent more time guarding the competitiveness of the financial institutions it supervised than reining in their excessive lending practices, it’s finally laying out a plan for far more intrusive oversight.

The authority, which shares resources with the central bank and is due to merge fully with it this summer, will publish Monday Ireland’s version of the Turner review, the blueprint on overhauling the U.K. regulatory system which was written by Adair Turner, the Financial Services Authority’s chairman, in March 2009.

The new report represents an assessment of the weaknesses in Ireland’s system of oversight by two one-time senior supervisors at the U.K. regulator who were brought in to steer the IFSRA by the central bank in January — Matthew Elderfield, the chief executive and Jonathan McMahon, the head of financial institutions supervision.

The regulator will lay out reforms which are also underway in many other financial centers, such as tougher liquidity rules, new standards on corporate governance and bank pay, as well as limits on the exposures a bank can take to any other single company. It will also lay out an improved system for dealing with failing banks.

But it will also lay out plans to tackle some peculiarly Irish problems.